H. Ungerer

15/12/1997

London

SUMMARY

The 1st January 1998 will be a watershed for European telecommunications
: It will open a new telecommunications era for the 380 million
citizens of the European Union.

The implementation record

The implementation record by Member States is carefully monitored.
The European Commission has strengthened its internal structure
in this respect and has created a Joint Team between DG IV, the
Competition Directorate General responsible for the liberalisation
deadlines, and DG XIII, the Telecommunications Directorate General
responsible for the harmonisation framework. The latest status
report on implementation was issued in November ("Communication
to the Council, the European Parliament, the Economic and Social
Committee and the Committee of the Regions on the implementation
of the telecommunications regulatory package - first update"
COM(97)504, 8th October 1997).

Overall, we note substantial progress : implementation of the
framework by more than 90% by six of the ten Member States which
had not been granted any deferments. Eight of these ten Member
States have implemented more than 80% ; this means that more than
three quarters of the Member States which have not been granted
derogations can be said to have transposed most of the legislative
framework. We are optimistic on full implementation. Competition
Commissioner Van Miert has announced the rapid launching of infringement
procedures where required to underline the determination of the
Commission.

We have simultaneously closed the loop holes which had been left
for some Member States. Derogation periods for Ireland and Portugal
have been shortened to 1st January 2000, for Luxembourg to 1st
July and for Spain to 1st December of next year, and Greece to
31st December 2000. This means that the EU's telecommunications
market will now be fully liberalised in all Member States by the
year 2000, including those countries for which transition periods
beyond 1st January 1998 had been originally foreseen.

Access and interconnection

The issues surrounding access / interconnection will be the central
immediate focus as we move into the first days of a newly liberalised
market environment across Europe.

The framework created by the EU's Open Network Provision framework,
ONP, is now being filled in at the national level by the National
Regulatory Authorities, the NRAs, which have, or are being created.

At the same time, we have intensified the application of EU-competition
rules to access cases. It must become clear that refusing access
or imposing unfair conditions can result in anti-competitive behaviour
subject to the provisions foreseen for such behaviour under competition
law, including fines where required. We are developing and defining
our approach to essential facilities. The Commission published
a draft Notice earlier this year on the application of competition
rules to the issue. We have now finalised work on that Notice
and we expect adoption right after the full liberalisation date
of 1st January 1998.

We have seen substantial progress during the last two months as
regards access and interconnection agreements in the EU. After
first benchmarking interconnection agreements in the context of
the competition case against DT Telekom, the Commission generalised
this approach and published a Recommendation on interconnection
rates based on best practice in the EU, i.e. the three lowest
interconnections rates practised or announced. in the EU at the
time (UK, France, and Denmark). As regards local access rates,
the recommended range is between 0.6 to 1.0 ECU/100, i.e. 0.7
to 1.2 US cents. (see Commission Recommendation on Interconnection
in a liberalised telecommunications market / Interconnection pricing;
C(97)3148, 15th October 1997). This will put interconnection
rates in Europe among the lowest in the world.

Alliances

We assume a positive attitude towards new vertical and horizontal
partnerships and ventures, as long we can be convinced of the
real synergies and benefits which should form the underlying logic
for the moves. Under this reasoning, we have approved the main
global alliances : BT/MCI, GlobalOne, and four weeks ago Unisource/Uniworld/AT&T.

If, on the other hand, it looks more like a defensive strategy
to sew up markets and shut out competitors, then EU competition
rules will be used without hesitation to block the agreement.

We are watching out very closely for bottlenecks - preventing
the creation of new ones and ensuring fair conditions of access
where we have a fait accompli - and for any extensions of existing
dominant positions.

This is just an example of our major objective : opening markets,
avoiding market bottlenecks, opening the door to new development
and technologies - and this means to more investment and jobs.
We need the necessary incentives in the markets to fully exploit
the new technological possibilities of telecoms networks on the
one hand, cable networks on the other. This is what creates new
markets and maximum market potential.

Convergence

We recognise that the distribution networks for the information
products of the future will rely on combinations : of wired/wireless
, telecom/cable, cable/satellite

This means that convergence and multi-media will be key characteristics
of the future. The Commission is publishing a Convergence Green
Paper on the matter

The EU-Cable Review which addressed the question of joint provision
of telecoms and cable-TV networks by dominant operators in most
Member States, must be seen in this context. The Review, announced
in the EU Cable Directive and the Full Competition Directive was
prompted to a large part by the UK experience. It addresses
the issue of cross-ownership and future relationship of telephone
networks and cable.

The Cable-Review is now nearing completion. The studies assess
different policy options based on results of analysis of the market
itself and of actual and potential policy impact on the developing
multi-media market structure.

The Internet could develop into a link between current networks
and the digital delivery systems of the future. To do so it would
need to overcome current structural limitations and manage a breakthrough
of an order of magnitude in speed and capabilities to reach true
interactive voice and video delivery capability. Recent signs
of convergence of the new digital TV-channels and web access in
the US may point the way.

The issue is the control of the gates between the components of
the future systems. We must move towards multi-media without
creating new communications super-monopolies. This is at the
heart of the cable issue and of the Cable Review.

Issues ahead

The 1st January 1998 will mean fundamental change of the basic
conditions for doing business in the sector in Europe. The effect
is magnified by the commitments taken under the WTO Agreement
for the same date.

In the future, telecom companies will no longer be able to thrive
if they only think national. They will have to think European
and global. BT's strategic moves may serve as an illustration.
On the regulatory and competition side, we will need close coopertion
and interaction between the national and the European levels.
Our intensifying contacts with Oftel and the Office for Fair
Trading may service as an example.

Our immediate task is to make liberalisation fully effective.
We are now entering a transition period, which will be a period
of intensive work to ensure that competitive structures will develop,
particularly in the local loop. After the change of regulation,
we must address the change of market structures. This will be
a difficult period which may well take us up to five years.
Competition law at both European and national levels will play
a major role.